Amendment to RBI Act will further develop money market
Mumbai: With the government's deciding to amend the Reserve Bank of India (RBI) Act on Wednesday, the country's apex bank would now be bestowed with greater powers to set the minimum statutory liquidity ratio (SLR) and cash reserve ratio (CRR) for the banking system as per its monetary policy stance.

Commenting on this move, Rakesh Mohan, deputy governor, RBI said, "RBI would get greater flexibility in setting the SLR and CRR requirements. There would also be a legal backing to the reverse repo and repo transactions, which would result in further development of the money market."

Bankers expect that a greater flexibility in setting the minimum SLR and CRR requirements, would enable RBI to lower the SLR requirements to encourage greater credit off-take. This would eventually result in better liquidity management in the system.

The amendment of the Act is also expected to provide a legal status to the derivatives contracts. The lack of such status had restrained some players from actively participating in the derivatives market. A legal status to the over the counter (OTC) transactions in the derivatives markets is expected to encourage more number of players in the derivatives market.
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Aurobindo Pharma FCCB issue raises $200mn
Hyderabad: Aurobindo Pharma Ltd has issued and completed the allotment of foreign currency convertible bonds (FCCBs) worth $200-million in two tranches. While the first tranche consists of $150 million, the second tranche consists of $50 million.

The company has informed the stock exchanges that these FCCBs were issued at zero per cent, due May 2011, and listed on Singapore Exchange Securities Trading Ltd, Singapore.

The first tranche FCCBs are convertible into equity shares of the company within a period of five years at a conversion price of Rs1,014.06 per share. It will have a fixed rate of exchange on conversion of Rs45.145 per US dollar.

The second tranche of FCCBs are also convertible into equity shares of the company within a period of five years. However, the conversion price would be worked out on a different formula. It would be more than 1.3 times of volume weighted average price of a share for a period of 30 days prior to conversion price setting date on May 17, 2007. The floor price would be Rs665 per share with a fixed rate of exchange on conversion of Rs45.145 per US dollar.

Barclays Bank PLC and Deutsche Bank AG have acted as the lead managers and book runners to this FCCB issue, the company informed the exchanges.
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RBI cancels licence of Baroda Mercantile co-op bank
Mumbai: The Reserve Bank of India has cancelled the licence of the Baroda Mercantile Co-operative Bank, Vadodara, since it has ceased to be solvent.

The Registrar of Co-operative Societies has also been requested to issue an order for winding up the bank and appoint a liquidator, said an RBI release.

On liquidation, every depositor would be entitled to repayment of deposits up to a monetary ceiling of Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation. "The RBI decided to cancel the license of the Baroda Mercantile Co-operative Bank Ltd as a final step after examining all the options for the revival of the bank and in order to protect the interest of the depositors," said the release.
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